In a recent note, Goldman Sachs analysts said that global hedge funds continued divesting from technology stocks for the third consecutive week, marking it the most net-sold sector. Some funds have also initiated short positions in tech stocks, underscoring a notable shift in sentiment.
Hedge Funds Sold Tech Stocks at the Highest Level in 11 Weeks
Global hedge funds offloaded technology stocks last week for a third consecutive week as money managers reacted to recent declines in the S&P 500 index and reduced exposure to big tech stocks, Goldman Sachs wrote in a note.
According to the bank, tech stocks were the most net-sold sector in the week that ended January 6, with the hedge funds selling these shares at the strongest pace in 11 weeks.
Additionally, the funds not only exited long positions but shorted these equities, betting their stocks would decline. Goldman said different technology stocks, including communication device makers, software providers, chip manufacturers, and tech hardware and storage companies, were offloaded.
Moreover, the bank said that hedge funds also sold consumer discretionary companies manufacturing products that shoppers like to buy but are not essential. Funds already short in this sector witnessed a 3.5% increase in performance.
Speculators ditched equity positions at the quickest pace since September 2023, adding that traders were net sold worldwide in hotels and restaurants, car manufacturers, and retail stores.
Goldman’s prime brokerage department, which offers services to hedge funds, saw investors’ performances decline 1.07% between Dec. 29 and Jan. 4.
Big Tech Leads to Market Losses
Though signs of a slowdown in the recent stock market rally emerged in December, the first week of 2024 was particularly challenging.
The S&P 500 fell around 1.8% in the past five trading sessions, falling to the lowest level in nearly a month. The technology-focused Nasdaq 100 lost more than 3.5% during the same period, just weeks after hitting an all-time high last month.
Much like how Big Tech spearheaded the market gains last year, the current losses are once again being led by these stocks, accounting for over 70% of the S&P 500’s gains in 2023. Apple, in particular, has been a significant contributor, facing a decline of over 3.1% since the year’s start following a downgrade by Barclays analysts.
Is the current sell-off a temporary pullback for US stocks or signs of a long-term slowdown? Let us know in the comments below.
About the author
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.